Oregon Governor's Tax Proposal Faces Criticism From All Sides

May 16, 2018

Oregon Gov. Kate Brown has said she’s calling a special session next week to correct a simple matter of unfairness in state tax policy. But the first public hearing on Brown’s proposal Wednesday suggested debate could be anything but simple.

In a hearing at the state Capitol, lawmakers, schools lobbyists and tax wonks alike offered criticisms for the governor’s plan to extend a roughly $11 million tax break to a segment of small businesses known as sole proprietors.

The critics said that money—a pittance in the scheme of the state budget—might prove important as Oregon struggles to adequately fund schools, health care and other responsibilities.

“Though $11 million in the current biennium doesn’t seem like it’s a lot, that’s 123 teaching jobs for a year you could pay for with that money,” said Laurie Wimmer, of the Oregon Education Association, pressing lawmakers to make up money for the cut by raising money from larger businesses.

State Rep. Alyssa Keny-Guyer, D-Portland, seemed to agree.

“We should be taking the money from millionaire business owners in order to expand it for the truly smaller businesses,” she said.

The critiques revealed the push-and-pull over an idea that Democrats largely dislike, and Republicans criticize as a campaign tactic that Brown is using during her re-election effort. And they come as Brown’s opponent in that race, state Rep. Knute Buehler, R-Bend, challenged her on Wednesday to include school oversight issues in the upcoming special session.

But Brown told lawmakers she is simply trying to make the system fair.

“I’m certainly well aware that not everyone has been as enthusiastic about this special session as I have been,” she said, adding that creating benefits for small businesses is “more than enough justification for me in this special session.”

The proposal the governor has put forward would extend tax breaks the Legislature gave to other businesses in 2013. In the years since, the policy has been criticized as benefiting primarily rich businesses. Some have said they regret approving the breaks at all.

House Democrats so dislike the tax policy that they voted to severely curtail it last year, though the bill died in the Senate. That vote led House Minority Leader Mike McLane to press Brown on her proposal.

“Do you have concerns about House Democrats repealing what you propose here today, simply in the next session?” he asked.

Brown replied: “In terms of repealing, I’d want to see further analysis. At this point in time, what we want to do and what we should do is provide tax fairness.”

Ideas floated Wednesday to tweak the proposal included making it easier for businesses to qualify for tax breaks, and decreasing the amount of income eligible for a favorable rate. Currently businesses can get a break on up to $5 million in income a year.

According to the Legislative Revenue Office, the tax break Brown is floating could come to cost more than $13 million a year, with roughly three-quarters of the benefit going to businesses with income of more than $200,000 per year.

Advocates on Wednesday asked lawmakers to take those numbers seriously.

“I want you to think about it not as a number, but what it buys,” said Jodi Wiser of Tax Fairness Oregon. “You’re not giving away a number, you’re giving away a week of school in the lifetime of a student who’s in kindergarten now.”

House Speaker Tina Kotek, who’s chairing a joint House-Senate committee taking up the proposal, warned legislators that she’d only consider this one bill during the upcoming special session. That was meant to stop legislators from trying to push wish-list items through. Kotek spoke only hours after Buehler floated the idea of shifting the focus of the special session.

The morning after his primary win, Buehler held a press conference in front of the Portland Public School administration building and called on the governor to focus on teacher contract reform.

When it comes to expanding a tax cut for businesses, Buehler said, “there is no urgency, there is no emergency.”

Buehler is pushing to prohibit purging certain records from teachers’ personnel files. The call comes after reporting by The Oregonian/OregonLive revealed how one teacher was able to remain employed after several allegations of sexual misconduct.

Buehler's new idea would seem to go against members of his own party. Republicans like McLane have said the scope of the special session should remain narrow. But on Wednesday, they signaled support for their gubernatorial candidate.

“What is more of an emergency: protecting our students from predators or passing a new tax break to prop up the governor’s struggling re-election campaign?” Preston Mann, spokesman for the House Republicans, said in a statement.

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